Creative Office Space Trends

loft office space with workersJust exactly what is “creative office space”?  What are today’s tenants looking for in office space?  How are building owners accommodating this demand?  Those questions were addressed a couple weeks ago at the Chicago Creative Office Summit.   It was a roundtable discussion among architects, engineers, developers, a furniture vendor, a general contractor, building owners as well as office co-location companies.  Here are the 10 key takeaways.

  1. One of a company’s biggest costs is employee attraction and retention.  The right work space goes a long way in achieving this objective.
  2. Shrinking Footprint – today the average space utilization is around 150/sf per employee and by 2017 it is predicted to be closer to 100/sf.  While personal space is shrinking, the amenity space is increasing.  Technology spending is also increasing.  More companies are creating tele-presence rooms to connect their global and mobile workforce.
  3. Open space isn’t necessarily creative space.  The design pendulum has swung pretty far toward the open space layout which is not a “one size fits all” solution.  In fact, 70% of all offices now have an open floor plan.   Every business, however, is unique and should create a space that enhances their business.    The open office space layout was recently criticized in The New Yorker in a January 7, 2014 article entitled “The Open-Office Trap” by Maria Konnikova.  There they state that the open office space can be detrimental to productivity and creativity based upon studies they cite.  From my experience, however, an open plan can work for the right company if the space is designed properly with the right furniture, etc…
  4. Creating the right work space for a company is a major challenge today as we have 5 different generations of workers.   Beyond trying to reconcile the multi-generational needs, there’s the added challenge of creating a space that also appeals to the company’s clients and vendors.  So, it’s a complex consumer experience.
  5. While construction costs are less for a more open plan, budgets are increasing for furniture and technology.    Also, from my experience, I’ve seen many tenants mistakenly assume that the wide open space without a ceiling or flooring would be inexpensive.  A lot of work, however, goes into creating such an industrial look.   Arguably some of the costs should be borne by the landlord as a “base building expense”; see my post on how to negotiate tenant improvements
  6. Open space without a ceiling and flooring is consistent with the philosophy of many companies today of transparency and functionality.
  7. Adaptive re-use of older buildings (office and warehouse) is very popular as the space offers unique characteristics, history and warmth.  It is also very sustainable; not to mention much less expensive, than constructing a new office tower.  They also lend themselves to incorporating outdoor spaces (i.e., rooftop decks) and create a more residential feel where many businesses today are striving for a more work-life balance.   It was astutely observed during the summit that rooftop decks have become the “Jacuzzi” amenity for today’s office space users.
  8. How are traditional office buildings competing for today’s office tenants?  While any building can remove ceiling and carpet, it goes beyond that to be relevant to today’s tenants.  Successful buildings are re-positioning themselves holistically from an extensive amenity base (e.g., fitness centers, bike rooms, conference centers, tenant lounge areas) and integrating into their neighborhood.  The one advantage that these traditional office buildings offer is scale: large efficient blocks of office space are not common in loft office buildings.   Many technology companies, however, prefer loft buildings given their authenticity and unassuming character.
  9. Co-working spaces are gaining traction as the number of independent contractors and freelance professionals continues to rise.  According to a study by Intuit (Intuit 2020 Report)  it is estimated that by 2020, 40% of the American workforce will be comprised of such independent contractors and freelancers.  Going beyond the traditional “executive suite”, these co-working spaces are about creating a community to collaborate.  Analogous to retail landlords looking for the right mix of retail tenants, these co-working companies are looking for the right mix of skills and chemistry of customers to co-work.  The physical environment of many of these co-working spaces is amazing and is simply beyond the reach of your typical small office tenant who does not have a Google facility budget. Here are links to a couple of co-working companies: Grind and MicroOffice.  While most of these co-working spaces are in urban areas, we are starting to see them in Chicago suburban markets as well as recently reported in The Daily Herald.   Given the softer suburban office markets, I can see this trend pick-up in suburban markets.
  10. Going to the Dogs.  While it has been common for many loft buildings to allow tenants to bring their pets to work, we’re seeing some traditional office buildings adopt the same policy to again create the residential feel and work-life balance.   While I love my dog, I think this could lead to more distraction in the office particularly for mid to larger size companies; but, then again most dogs are more dog friendly than mine.

Don Wenig
Blackacre Advisors LLC

DISCLAIMER.   Our writings are from a real estate transaction perspective and for informational purposes only. Nothing herein shall be considered legal, accounting, tax, or architectural advice. Please consult with the appropriate professional(s).

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